How to prepare for a stock market crash in gold and silver?

A stock market crash is a sudden and shock-like drop in prices. Often, a stock market crash happens unexpectedly and prices plummet. In times of a stock market crash, the following question comes up; "will gold and silver also crash?". Should this be the case, what should I do? Is it smart to sell my precious metal quickly to buy it again after the crash?
 

 
A stock market crash comes out of nowhere and in advance it is not clear how big the crash will be. Nevertheless, there are ways in which people who invest in gold and silver could prepare.
 

Stock market crashes vs gold and silver

 
The table shows that gold often rises during times of stock market crashes. Therefore, gold's average during stock market crashes is also in the green. Based on this data, it can be suggested that gold is not likely to fall during a stock market crash since often the opposite has happened. Silver, on the other hand, colours a lot of yellow, meaning silver does fall a lot during times of a stock market crash. This drop in silver can be explained by a decline in demand for industrial silver. Indeed, it falls as a bad stock market is accompanied by a deteriorating economy. However, it is true that the silver price does not fall lower than equities.
 

Gold rises

The World Gold Council has also conducted a study on the subject and based on this, it can be said that gold rises in times of stock market crashes. ‘The bigger the stock market crash, the more the gold price rises,’ the World Gold Council said. Based on this research and table, it can be observed that while gold generally rises during stock market crashes, silver falls. However, silver does not fall more than equities.
 

Diversificatie

One of the advantages of investing in gold and silver is that they are not correlated with other investments. This means that gold and silver can actually rise when others fall. This can be explained by looking at the purpose of the investments. Equities benefit from economic growth and stability. Gold, on the other hand, benefits from economic distress and crisis. When things are not going well in the stock market, people tend to look for a so called safe haven. This safe haven can be found in gold. Still, a stock market crash cannot assure you that gold will rise and the situation remains tense.
 

Increase in premiums

During the stock market crash of late 2008 and 2009, premiums on gold were so high that investors only saved about 10% on Silver Eagles. At the time, people also had to wait several weeks for their orders. Should there be a stock market crash now, the same thing is likely to happen. The high increase in demand will lead to a further rise in premiums.
 

What to do in times of a stock market crash

With this information in mind, there are 3 options you might consider.
 
First is the option of keeping your gold and silver. There is always the possibility that you could miss out on profits by selling it. Besides, you never know for sure what will happen and selling your precious metal could work to your disadvantage.
 
Secondly, there is the option of selling your precious metal. Selling your precious metal provides money. This can also give you strength in times of a drop in gold and silver prices. When that happens, you can buy more gold and silver than you had before.
 
The third option is dollar costing. This is an investment strategy where the aim is to reduce the impact of volatility. If you buy a few ounces every month, you need to worry less about the price. Indeed, since these are smaller weights, the price has less of an impact. This strategy makes you feel less bummed when the price drops.
 
Disclaimer: The Silver Mountain does not provide investment advice and therefore this article should not be considered as such. Past results do not guarantee future results.